Home Buying in Santa Monica>Question Details

Jeff Orgill, Other/Just Looking in Santa Monica, CA

Is it unwise to buy an investment rental property in a rent controlled area such as Santa Monica?

Asked by Jeff Orgill, Santa Monica, CA Tue Apr 19, 2011

Help the community by answering this question:


If you buy a property with a Torca tenant and that tenant dies, can their spouse or children have the right to continue living in the property or would they have to leave?
0 votes Thank Flag Link Tue Oct 22, 2013
I would definitely consider Santa Monica a wise investment, here's why:
1. Rental properties are most of the time full, as many other areas you could struggle to find renters
2. Santa Monica does have rent control, but it is specific to each building, however I would steer clear of properties that have had a long term tenant such as 20 years because this rent may be significantly smaller
3. Desirability-everyone wants to live in Santa Monica with the Beach, Great Shopping, and Restaurants

Give me a call and we can discuss more of your options on purchasing investment rental property in Santa Monica, I know the area extensively as I both live and work here.

Have a great day,
Heather Paul, Realtor
Coldwell Banker
Office 310-586-0364
Cell 310-923-2334
0 votes Thank Flag Link Wed Feb 29, 2012
Jeff- I live and work in Santa Monica. The area of Santa Monica is rent controlled but the rent control is building specific. Not all rentals in Santa Monica are rent controlled. Santa Monica is a great rental property area, if you buy rent controlled property- you need just to make sure the property is priced for that. The rent control properties to stay away from are the ones that have long term tenants that do not ever plan on moving. I have attached a link to Santa Monica Rent control board.

Let me know if there is anything that I can assist you with.
0 votes Thank Flag Link Thu Apr 21, 2011
Hi Jeff:

Santa Monica offers a lot in the value of a rental property, ie: being next to the ocean, local shops, restaurants, night life, schools, transportation, etc. However, one thing that you need to be aware of is that many of the apartment buildings that were converted to condos under the TORCA rules, may still have an older tenant that resided in the unit when the conversion took place. These tenants are "Grandfathered" under the Santa Monica Rent Control Guidelines, which means, that they can not be evicted for owner occupancy and several other reasons and their rents will be low. Ex: a 3 bedroom 2 bath condo, 4 blocks from the ocean, occupied by the same tenant for 27 years, and was the tenant during the TORCA conversion, only pays $1288 per month. This rent amount is regulated by the Rent Control Board with yearly increases. You can not just raise the rent to the current market value. If you wanted to move into this unit, relocation fees would need to be agreed to and paid to the tenant to vacate the unit, and this can be rather costly.

So when looking in Santa Monica, seek a vacant condo unit for purchase or other types of properties, such as a multi-unit apartment building or a single family home.

The City of Los Angeles does not have this type of program. However, rental units in the City of Los Angeles that were built prior to 1978 are covered under the LA Rent Stabilization Ordinance. Anything built after 1978 is not. Many areas in the San Fernando Valley are included in City of Los Angeles. Rule of thumb, if LAPD and the LAFD respond to emergencies at a location, it's the City of Los Angeles. If the Sheriff Department or other entities respond, (with the exception of West Hollywood, which is under WEHO Rent Control), more than likely is not the City of Los Angeles and not under rent control.

Non incorporated areas of Los Angeles County, ie: Glendale, Marina Del Rey, Burbank, Beverly Hills, Culver City, Inglewood, the South Bay (with few exceptions) do not have Rent Control.

Feel free to contact me if you would like more information.

All the best,
Kat Becker, Estate Agent
Prudential California Realty
0 votes Thank Flag Link Wed Apr 20, 2011
Dear Jeff,
Many property owners who are under rent control, are quite displeased about it. With the rate of inflation and constantly increasing costs it's difficult to show a possitive cash flow with such property. Most people do not go into an investment to lose money.
0 votes Thank Flag Link Wed Apr 20, 2011
It depends... if you don't mind owning property in one of the most rent-controlled areas in the universe, then I guess is fine... Even if you are a great landlord, you will have the rent board checking up on you constantly...

If you buy in other areas you may have more freedom of expression and less cooks in the kitchen... BTW, West Hollywood and Beverly Hills are comparable with the rent control...
Web Reference: http://www.selectrecorp.com
0 votes Thank Flag Link Tue Apr 19, 2011
I've lived in and around Santa Monica for almost 30 years and I don't think it's unwise at all. If you purchase a building with current tenants (which will most likely be the case), your early rent increases will be regulated by the City of SM Rent Control Board. However, when I tenant moves, you are able to raise the rent up to current market value. Of course you can get all the details before you purchase anyway and make your decision based on the exact circumstances. All I know is, people always want to live in Santa Monica and why not own a part of it. Good luck!
Web Reference: http://www.kristinkanan.com
0 votes Thank Flag Link Tue Apr 19, 2011
I want to buy duplex in Santa Monica. It has 2 tenants and 1 tenant is difficult and won't let people see their place. I want to take it off the market and renovate and move in. Which means I will not be moving in until renovation is complete. Can I evict tenants and how long would that take? Do I have to pay relocation fees. The current owner just died and the property is in a trust.
Flag Sun May 11, 2014
In a nutshell - yes. GRMs on rental properties tend to be high in affluent neighborhoods such as Santa Monica in any case. Why make it even worse with draconian rent control laws that dictate what you can and can't do with properties you own? I don't advise any of my clients to buy rental properties in Santa Monica. Too much hassle, not enough return.
0 votes Thank Flag Link Tue Apr 19, 2011
Hello Jeff:

As long as the rents are ok and the cap is good I don't see it as being a bad thing.

Monique Carrabba
The Carrabba Group
(323) 899-2900
0 votes Thank Flag Link Tue Apr 19, 2011
If the price is right, could be a great investment. Compare the price, the rents over the time you expect to own the building, the future resale price and the cost of maintaining the building, with other buildings and pick a winner.
Probably I would not recommend it if you are a first time real estate investor. It requires a level of experience.
Good Luck!
0 votes Thank Flag Link Tue Apr 19, 2011
I know many investors who have made lots of money investing in Santa Monica income properties. You must find an agent who is familiar with Santa Monica Rent Control laws and you must become familiar with them yourself. Lots of properties have great upside potential because of Vacancy Decontrol. I would go down to the Rent Control Board at City Hall and get to know the people who can guide you with the rules and a good Santa Monica agent.
0 votes Thank Flag Link Tue Apr 19, 2011

This all depends upon what the rental restrictions are and the nature of your personal rental goals. Are you considering annual or seasonal rentals?

Rental restrictions that limit the number of times and the duration of each rental can create limits that get in the way for some rental opportunities. These infringements many times have a greater impact on the seasonal rental arrangement than the annual program.

Whether or not it's a solid move may depend on your overall plans and expectations.

Good luck,

0 votes Thank Flag Link Tue Apr 19, 2011
It depends on your exit strategy and your numbers.
0 votes Thank Flag Link Tue Apr 19, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer